What to know about FLSA changes

By Larry Morgan, MAIR, SPHR, SHRM-SCP, GPHR

Earlier this year, the U.S. Department of Labor (DOL) proposed preliminary changes to the Fair Labor Standards Act, which regulates overtime pay, minimum wages, youth worker safety issues and travel time.
 
On Sept. 24, the DOL announced its final rule on raising the salary threshold needed to satisfy the executive, administrative and professional exemptions to the FLSA.
 
Here are the highlights:
  • There are no changes to the “primary duties test.” That is where the focus of the job is, and most of the time spent to maintain the exemption. The duties must fall into one or more of the categories (executive, administrative, learned professional, creative professional, computer professional, outside sales or highly compensated).
  • The threshold of salary minimum moves from $23,660 to $35,568.
  • This changes the current $455/week to $684/week (Note: Exempt employees must be paid on a weekly “salaried basis” regardless of hours worked, quality or quantity issues. There are exceptions for midweek start and the end of employment, as well as full-day absence for personal or sick leave reasons.
  • The new threshold increase occurs Jan. 1, 2020.
  • This is the first update to the FLSA minimum standard in 15 years.
  • The “highly compensated” exemption moves from $100,000 to $107,432 annually.
  • The new regulations allow employers to use nondiscretionary bonuses and incentive payments, including commission paid annually to satisfy up to 10% of the standard salary level.
  • The DOL has indicated their intent to update the salary requirement on a more regular basis in the future.
Here are potential issues: 
  • In November 2016, a federal judge in Texas issued an injunction delaying the Obama administration proposed changes, stating the DOL exceeded its authority in issuing the regulation.
  • If the Fifth Circuit Court of Appeals affirms the earlier ruling, the new salary regulations could be invalidated. 
  • Several states also challenging the DOL’s authority could drop their previous objections of file new ones.
  • Hopefully the issue will be resolved prior to Jan. 1, 2020.
What to do now:
  • Employers should carefully review job descriptions and duties to ensure compliance.
  • Examine persons paid under the $684/week to determine a shift to nonexempt status or increase salary levels once a final decision is made.
  • Attend the Oct. 29, 2019 MNCPA webinar on the topic to learn more about this important compliance issue.

Larry Morgan runs the MNCPA HR Hotline and is president of Orion HR Group, LLC. He is a regular contributor to Footnote. You may reach him at larry.morgan@orionhr.com

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